Belgium - Income Tax

Belgium - Income Tax

Taxation of international executives

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Tax returns and compliance

When are tax returns due? That is, what is the tax return due date?

30 June for residents and, in principle, 30 September for non-residents. Later dates may apply when filing electronically. The exact dates are determined by the tax authorities each year and can vary.

What is the tax year-end?

31 December.

What are the compliance requirements for tax returns in Belgium?

All individuals resident in Belgium and non-resident individuals taxed on Belgian-sourced income are required to file an annual tax return. The government, in principle, issues a tax return form to each taxpayer.

Residents

For residents, their filings are due within one month after receipt of the tax form from the tax authorities and, in principle, at the latest on 30 June of the year following the income year. Resident taxpayers must obtain the necessary forms from the Ministry of Finance if they have not received them by 1 June. Resident taxpayers can opt to file their return electronically. Failure to comply with this requirement gives rise to a fine and/or penalty and could also result in taxation on an estimated basis.

In principle, Belgian law provides that the employers deduct a withholding tax from salaries payable to employees as determined by prescribed tax tables. The difference between the final tax liability and the withholding is payable or refundable within two months after receipt of the tax assessment. The tax assessment is, in principle, issued before 30 June two years following the income year.

Persons who are married or legally living together are required to file their tax return jointly except for the year of marriage, year of declaration of legal cohabitation, or if they are living separately. Spouses and legally cohabiting partners are taxed separately on all income. If the spouse/legally cohabiting partner does not work, up to 30 percent of the working spouse’s/legally cohabiting partner’s net employment income is attributable to the non-working spouse/legally cohabiting partner. (This allocation is limited to "EUR 10,290" on an annual basis in 2016).

Income of minor children is reported on the tax return of the parents as long as they are living with their parents, unless it is business income or alimony.

Non-residents

For non-residents the filing deadline is, in principle, 30 September of the year following the income year. Non-resident taxpayers must also obtain the necessary forms from the Ministry of Finance, if they have not received them in time. Non-resident taxpayers can also opt to file their return electronically.

In principle, Belgian law provides that the employers deduct a withholding tax from salaries payable to employees as determined by prescribed tax tables. The difference between the final tax liability and the withholding is payable or refundable within two months after receipt of the tax assessment. The tax assessment is, in principle, issued before 30 June two years following the income year. In specific factual circumstances there is no obligation to deduct withholding tax on the salaries paid to non-residents.

Persons who are married or legally living together are required to file their tax return jointly except for the year of marriage, year of declaration of legal cohabitation, or if they are living separately. Spouses and legally cohabiting partners are taxed separately on all income. If the spouse/legally cohabiting partner does not work, up to 30 percent of the working spouse’s/legally cohabiting partner’s net employment income is attributable to the non-working spouse/legally cohabiting partner. (This allocation is limited to "EUR 10,290" on an annual basis in 2016).  This allocation, as well as federal standard personal allowances and federal tax credits, only applies for taxpayers that have at least 75 percent of their worldwide income taxable in Belgium or taxpayers that are able to claim (partial) exemptions based on a tax treaty. Depending on the fact that the taxpayer is resident of another EER member state (not including Belgium), he/she will be able to claim (partial) regional tax credits too.

Income of minor children is reported on the tax return of the parents as long as they are living with their parents, unless it is business income or alimony.

Tax rates

What are the current income tax rates for residents and non-residents in Belgium?

Residents and non-residents

Income tax is calculated by applying a progressive tax rate schedule to taxable income. The rates are as follows:

Income tax table for 2016  

Taxable income bracket Total tax on income below bracket Tax rate on income in bracket
From EUR To EUR EUR Percent
0 10,860 0 25
10,860 12,470 2,715.00 30
12,470 20,780 3,198.00 40
20,780 38,080 6,522.00 45
38,080 Over 14,307.00 50

Resident tax rates also apply to non-residents.

Furthermore, the Belgian taxes calculated on the total amount of personal allowances (see below) will be deducted from the total amount of taxes.

Personal allowances EUR
Basic personal allowance 7,130
Personal allowance 1 child 1,520
Personal allowance 2 children 3,900
Personal allowance 3 children 8,740
Personal allowance 4 children 14,140
For every extra child 5,400
Extra allowance per child less than 3 years old (if no deductions for actual child care expenses incurred are claimed) 570

Residence rules

For the purposes of taxation, how is an individual defined as a resident of Belgium?

A resident of Belgium is defined as a person who has his/her family home in Belgium. If a person does not have his/her family home in Belgium, he/she will be considered as a resident  or the place from where he/she manages his/her personal wealth/business/occupation is located in Belgium. Persons registered in the Civil Register are presumed to be resident, unless the contrary is proven. Persons are irrevocably presumed to be resident of Belgium when their family lives in Belgium. 

Foreign nationals qualifying for the expatriate special income tax regime are deemed to be non-residents for income tax purposes.

Is there, a de minimus number of days rule when it comes to residency start and end date? For example, a taxpayer can’t come back to the host country for more than 10 days after their assignment is over and they repatriate. 

No.

What if the assignee enters the country before their assignment begins? 

The earlier-described residency rule will apply.

Termination of residence

Are there any tax compliance requirements when leaving Belgium? 

In principle, a resident individual must file a final tax return within three months of departure. The residence situation should, however, be analyzed taking into account the Belgian residence rules (such as family situation).

What if the assignee comes back for a trip after residency has terminated?

The assignee will remain non-resident as long as the conditions of residence are not fulfilled.

Communication between immigration and taxation authorities

Do the immigration authorities in Belgium provide information to the local taxation authorities regarding when a person enters or leaves Belgium? 

As part of the immigration process, an individual has to register himself/herself with the local commune upon arrival in Belgium and deregister himself/herself with the commune upon departure from Belgium. This information is available for the Belgian tax authorities. In practice, this implies that the individual automatically receives a Belgian income tax return form from the Belgian tax authorities.

Filing requirements

Will an assignee have a filing requirement in the host country after they leave the country and repatriate? 

If the assignee receives compensation (deferred payments, bonus, and so on) related to the assignment in Belgium that is considered as taxable in Belgium, there will be a filing requirement.

If any outstanding tax liability related to the Belgian assignment is paid by the employer afterwards, this payment will be considered as a taxable benefit on behalf of the individual which will trigger a filing requirement. 

Economic employer approach

Do the taxation authorities in Belgium adopt the economic employer approach to interpreting Article 15 of the OECD treaty? If no, are the taxation authorities in Belgium considering the adoption of this interpretation of economic employer in the future? 

Yes. The interpretation of the Belgian tax authorities of the notion employer in the framework of Article 15 of the double taxation treaties concluded by Belgium is outlined in Administrative Circular nr. AFZ 2005/0652 (AFZ 08/2005) of 25 May 2005. In the circular, the authorities follow the current interpretation of Belgian jurisprudence. According to the circular, the relationship between the employee and the employer is characterized by the existence of a link of subordination between the employer and the employee. The tax authorities are thus adopting the economic employer approach. Various circumstances should be taken into account to determine the possible existence of a link of subordination and they are in line with the Commentary on Article 15 of the OECD model tax treaty.

De minimus number of days

Are there a de minimus number of days before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimus number of days?

No.

Types of taxable compensation

What categories are subject to income tax in general situations?

Belgian residents are taxed on their worldwide earned and passive income. Non-residents are taxed only on their Belgian-sourced income. 

The following categories of income are subject to income tax:

  • earned income; 
  • income from self-employment; 
  • trade or business partnership; 
  • dividends; 
  • interest; 
  • income from real property; 
  • miscellaneous income.

Employment income is taxable when received or, when the employee is entitled to receive it, whichever occurs earlier. Employment income is subject to tax to the extent it was earned during a period of Belgium residence, or in the case of income earned while non-resident to the extent it was earned in respect of duties performed in Belgium.

Dividends and interest are subject to a withholding tax which is generally the final tax.

Tax-exempt income

Are there any areas of income that are exempt from taxation in Belgium? If so, please provide a general definition of these areas.

Tax-exempt income, regularly granted by the Belgian employer, includes meal vouchers, representation allowances, and daily expense allowances.

Please refer also to the section of tax-exempt income under the Belgian expatriate special income tax regime.

Expatriate concessions

Are there any concessions made for expatriates in Belgium?

The employee may qualify for a favorable tax status. Qualification for the expatriate special income tax regime is not automatic, but requires the filing of a special application request by both the employer and expatriate employee within six months from the first day of the month following the start of employment or secondment to Belgium. It should be clearly shown that the four qualifying conditions have been met.

  • The expatriate must be a foreign national.
  • The expatriate must be either an executive or a director of a company, or a researcher or a specialist.
  • The expatriate must be a non-resident for Belgian income tax purposes. The Expatriate Tax Circular of 8 August 1983 lists a set of factual circumstances that are indicative of such a non-resident status.
  • The expatriate must be temporarily employed in Belgium by an employer that is part of an international group of companies.

The expatriate who meets these conditions will benefit from tax concessions that reduce the annual taxable remuneration by the deduction of tax-free allowances up to a limit of EUR 11,250/EUR 29,750. Furthermore, the expatriate will only be assessed according to graduated tax rates on remuneration for work actually performed in Belgium and on other Belgian-sourced income (excluding movable income but including income from Belgian real property).

Under the Belgian expatriate special income tax regime, some so-called expatriate allowances (such as tax equalization, cost-of-living differential, housing differential, and home leave allowance) are treated as a reimbursement of extra expenses that are properly borne by the employer, rather than by the employee and are, therefore, not taxable to the individual employee. A distinction is made between non-repetitive expenses and repetitive expenses. The excludable portion of repetitive expenses is limited to EUR 11,250 per year, for expatriate personnel employed by operating companies, and to EUR 29,750 per year, for expatriate personnel employed by controlling and coordinating offices or research centers. However, education expenses, even though considered repetitive costs, as well as non-repetitive expenses, may be excluded without limit.

The following expenses are considered to be non-repetitive expenses.

  • Moving costs on arriving in Belgium and on leaving Belgium.
  • The cost of setting up a home in Belgium or other initial costs of first arrival in Belgium and decoration costs of a dwelling in Belgium.

Repetitive expenses that qualify for exclusion include allowances granted to cover the differences in cost-of-living and housing between Belgium and the expatriate’s country of origin, home leave, and tax equalization. However, the actual allowance paid only qualifies for exclusion to the extent permitted by prescribed guidelines.

The determination of the expatriate’s country of origin has a direct impact on the total amount of the tax-free allowances as the excludable expenses may only cover the cost differential between Belgium and the expatriate’s country of origin.

Education expenses

Education expenses (duly justified with invoices) for the expatriate’s children in primary or secondary schools, while repetitive in nature, are expenses that can be excluded in addition to the maximum amounts mentioned above. The excludable cost of education in Belgium includes tuition and registration fees, local transport, and other expenses imposed by the school, but exclude boarding expenses (food and lodging) and the cost of private lessons. With respect to education costs abroad, the excludable portion of education expenses incurred outside Belgium shall be determined on a case-by-case basis.

Tax equalisation

Tax equalization has been defined to include only the difference between Belgium income tax and the hypothetical home country federal national, as well as other sub-federal/national level income taxes (also referred to as regional taxes) that the expatriate would have incurred if living at home. For the calculation of the hypothetical regional tax, taxpayers are deemed to be resident in the capital of their home country. Social security charges do not, therefore, form part of the tax equalization concept and reimbursement of such taxes may not be excluded.

Moving costs

Under the Belgian expatriate special income tax regime, moving costs (duly justified with invoices) upon arrival in/leaving from Belgium are to be considered as costs proper to the employer (no ceiling applicable).

These moving costs cover the expenses related to moving expatriate’s personal belongings (from the home country to Belgium and vice-versa), including costs for prospecting real estate in Belgium. Lump-sum allowances or reimbursements of moving expenses that can not be justified with invoices always are to be considered as taxable in the hands of the employee.

First arrival costs

Under the Belgian expatriate special income tax regime, first arrival costs (duly justified with invoices) are to be considered as costs proper to the employer (no ceiling applicable) under certain conditions.

Please note that the expenses related to the purchase of items that an expatriate might take back to his/her home country after his/her assignment (furniture, home appliances, and so on) do not qualify for the exemption.

Salary earned from working abroad

Is salary earned from working abroad taxed in Belgium? If so, how?

For residents, salary earned from working abroad should be reported and might be exempted with progression depending on the applicable double tax treaty.

When benefiting from the Belgian expatriate special income tax regime, the taxable income may be reduced to the extent that the expatriate spends part of his/her business time outside Belgium. The tax authorities have provided precise rules for determining days worked outside of Belgium.

Taxation of investment income and capital gains

Are investment income and capital gains taxed in Belgium? If so, how?

Resident and non-residents taxpayers are taxable on capital gains realized on assets used for business purposes. Capital gains realized on land and buildings held for private purposes are taxable to resident and non-residents taxpayers under certain conditions. Capital gains realized on portfolio investments or other personal property held for private purposes are not taxable for residents and non-residents, provided they result from the normal management of private wealth and, for portfolio investments, provided such capital gains do not result from the sale of substantial participations. The capital gains resulting from the sale of substantial participations between two residents or between a resident and a non-resident, located within the European Economic Area (EEA), are free of taxation. On the other hand, capital gains resulting from such a transaction between a resident and a non-resident outside of the European Economic Area are taxable. 

Individuals benefiting from the expatriate special income tax regime are subject to these rules as non-residents, which means that the rules only apply to Belgian-source capital gains.

Other income taxable to residents and non-residents (to the extent it is Belgian-sourced income) includes miscellaneous profits and a widely defined range of other sources including prizes and subsidies.

Dividends, interest, and rental income

Dividends

Resident taxpayers are taxable on dividend income from a Belgian or foreign-source. However, it is not compulsory for individual resident taxpayers to report dividend income provided it has been subject to Belgian withholding tax, which in most cases is of 27 percent.

Non-resident taxpayers, including foreign nationals living in Belgium who benefit from the expatriate special income tax regime, are subject to Belgian income tax on Belgian-sourced dividends. Also, when such individuals have foreign dividends remitted directly to Belgian bank accounts, some tax treaties permit Belgium to withhold tax.

Interest

Interests accrued on a regulated savings account are tax-free up to EUR 1,880 per taxpayer. Above this amount they are subject to a 15 percent withholding and final tax rate.

Most other interests accrued in Belgium are subject to a 25 percent tax rate.

Rental income

Resident taxpayers are taxed on income from real property located both in Belgium and abroad. The income of real property abroad can in most cases be exempt with progression (depending on the application of a double tax treaty). Income tax is levied on the basis of the net rental income after deduction of a standard allowance. Non-resident taxpayers are taxed on income from real property located in Belgium on the same basis as residents. However, foreign real property income is exempt to non-residents.

The principal residence located in the EEA is, in many cases, free of personal income tax.

Mortgage loans concluded with a bank situated in the EEA for the acquisition of an immovable property located in the EEA may give right to tax savings in Belgium.

Gains from stock option exercises

Residency status

Taxable at:

  Grant  Vest    Exercise    
Resident Y/N Y/N Y/N
Non-resident Y/N Y/N Y/N
Other (if applicable) Y/N Y/N Y/N

Please note that the moment of taxation of stock options in Belgium depends on various circumstances (stock option plan, date of grant, and so on.)

Foreign exchange gains and losses

Foreign exchange gains and losses are, in principle, not taxable or tax deductible.

Principal residence gains and losses

Principal residence gains and losses are, in principle, not taxable or tax deductible.

Capital losses

Capital losses are, in principle, not tax deductible.

Gifts

Residents who make gifts of real or personal property are subject to gift taxes. For some types of gifts, it is possible to avoid gift tax.

The applicable rule with respect to gift tax and gift tax rates depends on the region of Belgium where the individual is living.

Additional capital gains tax (CGT) issues and exceptions

Are there additional capital gains tax (CGT) issues in Belgium? If so, please discuss?

There is no specific separated capital gains tax in Belgium. Some capital gains are taxed within the income tax regime.

Are there capital gains tax exceptions in Belgium? If so, please discuss?

A new tax on short term gains on listed shares and derivatives has been introduced. Any gains realized within a holding period of less than 6 months are taxed at a flat 33% rate. Short term capital losses are not tax deductible.

General deductions from income

What are the general deductions from income allowed in Belgium?

The following items of expenditure may be deducted from the income.

  • Social security payments: Belgian or foreign compulsory social security payments are deductible for income tax purposes.
  • Standard business deductions: A standard business deduction is computed on employment income as follows.

From EUR        

To EUR Base deduction for income below bracket (EUR)               Rate of deduction of income in bracket                             

0.00

8,450.00 0 30

8,450.00

19,960.00 1,653.12 11.0

19,960.00

Over 3,801.00
3.0
  • The maximum standard business deduction for employees is EUR 4,240.
  • For directors (board members and equivalent), the standard business deduction is 3 percent with a maximum deduction of EUR 2,390.
  • If the actual business expenses exceed the standard business deduction, the actual expenses may be deducted.
  • 80 percent of alimony payments paid in pursuance of the civil code, the judicial proceedings code or the Law on legal cohabitation or in pursuance of a similar foreign law.

Tax reimbursement methods

What are the tax reimbursement methods generally used by employers in Belgium?

The following are the normal methods of recognizing tax reimbursements paid by the employer:

  • current year gross-up 
  • current year reimbursement 
  • one year rollover.

Calculation of estimates/ prepayments/ withholding

How are estimates/prepayments/withholding of tax handled in Belgium? For example, Pay-As-You-Earn (PAYE), Pay-As-You-Go (PAYG), and so on. 

Income taxes are, in principle, withheld by the employer on a regular basis. The final tax payment should be made within two months of the date of the final tax assessment. It is also possible to make quarterly estimated tax payments during the income year to reduce the final tax payment.

Quarterly estimated tax payments give rise to a tax credit reducing the amount of tax due for the year. The tax credit will depend on the date of the payment (the earlier the payment, the higher the credit). The basis for determining these quarterly estimated tax payments is the estimated tax liability on projected taxable income less applicable withholding taxes and tax credits.

The amount of income tax withholding, if applicable, is determined in accordance to special withholding tax tables.

When are estimates/prepayments/withholding of tax due in Belgium? For example: monthly, annually, both, and so on. 

In case a withholding tax obligation exists, the employer should deduct withholding tax from the wages and transfer the withheld tax to the Belgian tax authorities by the 15th of the month following the payment of wages at the latest.

Tax prepayments should be made before the following dates during the income year in order to be creditable for the respective quarters: 10 April, 10 July, 10 October, and 20 December.

Relief for foreign taxes

Is there any relief for foriegn taxes in Belgium? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on?

In the event a specific double tax treaty has not been concluded, unilateral rules have been provided to reduce the burden of double taxation. These are described as follows.

A reduction by 50 percent of the Belgian income tax levied on foreign property income, income from personal services, and certain types of miscellaneous income, such as speculative income and alimony. 

A foreign tax credit is available for income derived from capital investments and movable property used for business purposes in Belgium and subject in the foreign country to a tax similar to the Belgian income tax. However, there are important restrictions.

No credit for actual foreign taxes paid on other income is available under Belgian domestic law, but foreign taxes are deductible against taxable income.

Tax treaties concluded by Belgium alleviate the tax burden in Belgium on certain foreign income received by resident taxpayers. Generally, with respect to personal property income, the taxpayer is entitled to a foreign tax credit referred to above and with respect to income other than personal property income, an exemption is provided. The exempt income may be taken into account in determining the rate of tax on Belgian-sourced income (exemption with progression method).

The use of split compensation arrangements may therefore prove favorable provided the foreign rate of taxation is lower than the Belgian one. Only the net amount of earnings derived from abroad, after deduction of the foreign taxes, is taken into account for determining the rate of taxation to be applied to the income derived from a Belgian source.

General tax credits

What are the general tax credits that may be claimed in Belgium? Please list below. 

There are a variety of tax credits available, each with their own specific rules of application, calculations and limitations. The most common are:

  • charitable donations 
  • capital and interest payments related to a mortgage loan 
  • service cheques
  • pension saving plan contributions 
  • life insurance plan contributions 
  • child care expenses 
  • investments to prevent burglary and fire.

Sample tax calculation

This calculation3 assumes a married taxpayer non-resident in Belgium with two children whose three-year assignment begins 1 January 2016 and ends 31 December 2018. The taxpayer’s base salary is USD 100,000 and the calculation covers three years.

  2016
USD
2017
USD
2018
USD
Salary 100,000 100,000 100,000
Bonus 20,000 20,000 20,000
Cost-of-living allowance 10,000 10,000 10,000
Housing allowance 12,000 12,000 12,000
Company car 5,400 5,076 4,752
Moving expense reimbursement 20,000 0 20,000
Home leave 0 5,000 0
Education allowance 3,000 3,000 3,000
Interest income from non-local sources 6,000 6,000 6,000

Exchange rate used for calculation: USD 1.00 = EUR 0.9018.

Other assumptions

  • All earned income is attributable to local sources.
  • Bonuses are paid at the end of each tax year, and accrue evenly throughout the year.
  • Interest income is not remitted to Belgium.
  • The company car is used for business and private purposes and originally cost USD 50,000, has a CO2-emission of 160 g/km, fuel type diesel and was first registered in January 2015.
  • The employee is deemed non-resident throughout the assignment.
  • Tax treaties and totalization agreements are ignored for the purpose of this calculation.
  • Application of Belgian expatriate special income tax regime (including 25 percent of foreign business travel and tax-free allowances limited to EUR 11,250).
  • Annual rent paid by the expatriate amounts to EUR 24,000.
  • Application of Belgian social security contributions.
  • Interest income is not remitted in Belgium.

Calculation of taxable income

Year-ended 2016
EUR
2017
EUR
2018
EUR
Days in Belgium during year 366 365 365
Earned income subject to income tax      
Salary 90,180.00
90,180.00
90,180.00
Bonus 18,036.00
18,036.00
18,036.00
Cost-of-living allowance 9,018.00 9,018.00 9,018.00
Net housing allowance 10,821.60
10,821.60
10,821.60
Company car 4,869.72
4,577.54
4,285.35
Moving expense reimbursement 18,036.00
0.00 18,036.00
Home leave 0.00 4509.00
0.00
Education allowance 2,705.40
2,705.40
2,705.40
Total earned income 153,666.70
139,847.50
153,082.30
Other income 5,410.80
5,410.80
5,410.80
Total income 159,077.50
145,258.30
158,493.10
Deductions 79,270.89
62,731.08
78,743.77
Total taxable income 79,806.61
82,527.22
79,749.33

Calculation of tax liability

  2016
EUR
2017
EUR

2018

EUR

Taxable income as above 79,806.61
82,527.22
79,749.33
Belgian tax thereon 32,986.00
34,441.00
32,751.00
Less:      
Domestic tax rebates (dependent spouse rebate) 4,355.00
4,355.00
4,355.00
Foreign tax credits 0.00 0.00 0.00
Total Belgian tax (excl. social security) 28,631.00
30,086.00
28,396,00

1 Certain tax authorities adopt an ‘economic employer’ approach to interpreting Article 15 of the OECD model treaty which deals with the Dependent Services Article. In summary, this means that if an employee is assigned to work for an entity in the host country for a period of less than 183 days in the fiscal year (or, a calendar year of a 12-month period), the employee remains employed by the home country employer but the employee’s salary and costs are recharged to the host entity, then the host country tax authority will treat the host entity as being the ‘economic employer’ and therefore the employer for the purposes of interpreting Article 15. In this case, Article 15 relief would be denied and the employee would be subject to tax in the host country.

2 For example, an employee can be physically present in the country for up to 60 days before the tax authorities will apply the ‘economic employer’ approach.

3All information contained in this document is summarized by KPMG Tax and Legal Advisers, the Belgian member firm of KPMG International, based on the Belgian Income Tax Code of 1992 and subsequent amendments; the Circular RH 624/325.294 of 8 August 1983; the Web site of the federal fiscal administrations; the Belgian Social Security Act of 29 June 1981; the Belgian Law of 30 March 1994; the Web site of the Belgium Social Security administration. 

© 2016 KPMG Tax and Legal Advisers, a Belgian Civil Cooperative Company with Limited Liability (burg. CVBA/SCRL civile) and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Tax rates are checked regularly by KPMG member firms; however, please confirm tax rates with the country's tax authority before using them to make business decisions.

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